GM: At least $1M for victims' families

General Motors said Monday it won’t cap the total amount it will pay out to victims of a deadly ignition switch defect, which the nation’s largest automaker failed to fix for more than a decade.

A victims compensation program designed by superlawyer Ken Feinberg, announced at the National Press Club Monday morning, will give families a base of $1 million for the death of a loved one, plus $300,000 for each surviving spouse or dependent to try to cover the emotional damages caused by the crashes. Families will choose between two methods designed by Feinberg for determining additional economic compensation.

Story Continued Below

“They’re funding it without any cap on the aggregate amount of money that’s going to be available,” Feinberg said. “GM basically has said whatever the cost to pay all eligible claims under the protocol, they will pay it. There is no ceiling on the aggregate dollars.”

The program’s announcement came hours before GM announced it was recalling another 8.4 million cars in North America, 7.6 million of them because of ignition issues. GM has now recalled 25 million cars in the United States this year, blowing past the previous record of 21 million set by Ford in 1981.

The company now says it will take a $1.2 billion charge on recalls in the second quarter, topping $2 billion for the year. Both chambers of Congress are investigating the company, and it faces prosecutors at three levels of government: Federal prosecutors in New York and the Securities and Exchange Commission, a group of state attorneys general and the District Attorney in Orange County, California, who filed a civil suit against the automaker on Friday.

GM is allowing victims who reached settlements with the company before the recalls began earlier this year to apply for additional compensation and won’t consider any additional factors — including drunkenness or speeding — in handing out awards.

Feinberg, the lawyer who previously administered victims’ funds for the Sept. 11 terrorist attacks, the BP oil spill and the Boston Marathon bombings, has broad power in running the victims’ fund. While GM can present evidence as Feinberg considers claims, it does not have any power to challenge his final decisions.

But Feinberg also acknowledged his program has its limits, and said he does not expect every victim of the defect — which led GM to recall millions of cars and has been linked to at least 13 deaths — to apply for compensation, since it requires waiving their right to sue GM or to seek punitive damages.

“This program is designed to help claimants,” he said at the National Press Club. “This program isn’t designed to punish General Motors.”

Feinberg repeatedly declined to offer estimates for how much GM will have to hand out or how many victims will file claims.While GM has only positively linked 13 deaths to the defect, plaintiffs’ lawyers have suggested much higher numbers. Rep. Diana DeGette (D-Colo.), the ranking member of a House subcommittee investigating GM, has said there could be as many as 100 deaths linked to the problem.

“I will not speculate about this,” he said during the press conference. “I haven’t got any idea.”

GM has acknowledged some engineers at the company knew about the problem for more than a decade, but an internal investigation found no deliberate cover-up, only a company culture that led to frequent buck-passing and poor communication. The initial ignition switch failure could cause Chevy Cobalts and Saturn Ions to suddenly stop and airbags to fail if a pothole or accidental hand swipe caused the key to slip out of the “on” position.

For those who suffered less severe injuries, initial compensation will be based on their time spent in the hospital, starting at $20,000 for a single night up to $500,000 for hospital stays lasting more than a month. More severe injuries will be compensated based on age, earning potential and other factors. For instance, a 10-year-old made paraplegic in a crash, Feinberg said, would receive $7.8 million.

GM CEO Mary Barra, who Feinberg met with several times while developing the compensation program, praised the announcement. Feinberg said GM wasn’t totally pleased with his set-up, but he declined to specify what issues the automaker raised.

“We are pleased that Mr. Feinberg has completed the next step with our ignition switch compensation program to help victims and their families,” Barra said in a statement. “We are taking responsibility for what has happened by treating them with compassion, decency and fairness. To that end, we are looking forward to Mr. Feinberg handling claims in a fair and expeditious manner.”